Suggested Answers of BT2 Revision Package - ASKnLearn

Conclusion on demand management policiesDemand management policies such as fiscal policy do not work well to curb the BOP deficitfacing the U.S. especially in the midst of a severe recession. However, the fiscal andmonetary policy can cushion the impact of the fall in AD from the global recession. However,appropriate supply side polices should be implemented to promote long term economicgrowth, this is especially important when the U.S. eventually emerges from the recession toensure its competitiveness is not compromised. Also, these policies seeks to solve cyclicalunemployment, there is still structural unemployment from the rising global competition thatneeds to be tackled.(Exchange rate policy can be used as well)Supply side Policy: To correct the problems of the BOT deficitDevelop new niche/comparative advantage for export growthThrough such schemes, the workforce will be equipped with new skills and knowledgerequired by the high-tech and knowledge-intensive industries. Training schemes should beput in place to not only retrain the already structurally unemployed but also those who maybe unemployed in future as the U.S. economy needs to maintain itself as a knowledgebasedeconomy.Increased in education and training of workers has an impact of improving the quality of ourworkforce which will lead to greater productivity and higher efficiency. With higher productivityand efficiency, the cost of production can be lowered making exports more competitive.Investing the necessary resources into developing new niche areas (comparativeadvantage) is important for the U.S. to correct the BOT deficit. This will allow the U.S. togenerate strong export growth and stimulate jobs and output for the economy. The globalrecession has aggravated the unemployment problem in the U.S. It was already facing stiffcompetition in certain industries from emerging China and India resulting in severe structuralunemployment. Hence there is an urgency to reemploy these displaced workers into otherindustries.U.S. has prided itself as the leading economy that recognizes and utilizes foreign humancapital to drive its economy and to encourage investments and innovations. It must continueto open its doors to globalization to encourage trade and human capital movement. This willhelp to maximize the potential from its own human resources and those from abroad in orderto stay ahead of its competitors.